New government business policies - corporation tax down but CGT rise likely

The new coalition government is thought likely to fulfill its promise on dropping corporation tax rates. The Tories have talked of cutting the main rate by three per cent to 25 per cent, and the small company rate from 22 per cent to 20 per cent.

But new Lib-Con government could likely see wealthier Britons pay a heavier price in helping the economic recovery than they anticipated under a purely Conservative government.

Concessions made to form the deal between the Conservatives and the Liberal Democrats are thought to include raising the 18 per cent rate of tax on gains on non-business assets to close to the 40 per cent higher rate of income tax – a central plank of Lib Dem policy.

Concerns about the effect the increase will have on entrepreneurs are aimed to be offset with "generous exemptions" for profits related to business. It is thought unlikely that the Entrepreneur's Relief will be scrapped.

The Treasury, under George Osborne's Chancellorship, will negotiate further threshold increases to meet the Lib Dem's £17 billion policy of raising income tax exemption to £10,000.

Another significant Tory sacrifice is the party's pledge to raise the inheritance tax threshold to £1 million, which is now considered very unlikely to take place during this parliament.

The government is also tipped to go ahead with the £3 billion reversal of the rise in employers' national insurance – a measure that is strongly supported by business. The Lib Dems have also agreed not to vote against next year's planned £550 million a year tax break for married couples, which gives it a high chance of being passed.

Beyond the compromises and conditions, George Osborne is expected to be given a largely free rein in finding £6 billion of spending cuts in this financial year. A full review of all Government spending is thought to be starting in the next few days and an emergency budget is expected within 50 days. There will also be a quick start to a review of Britain’s defence strategy, including the Trident nuclear deterrent.

The spending review will likely become the first test of the tentative coalition, when the two parties must align themselves and agree on potentially very sharp cuts.

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